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Estate Planning – How to get started

5 Mins 23 Jun 2023 0 COMMENT

Estate planning is a crucial aspect of financial planning. It refers to the process of making a comprehensive plan for the distribution of one's assets, such as property, bank accounts, investments, and other possessions, to their heirs or beneficiaries, while minimizing the tax liabilities and other legal hassles.

Why is estate planning important?

Estate planning is important for several reasons. Firstly, it allows individuals to ensure that their assets are distributed as per their wishes. Secondly, estate planning enables individuals to reduce the tax liabilities of their heirs and beneficiaries, thereby ensuring that their assets are preserved to the maximum extent possible. Thirdly, estate planning can help individuals to avoid disputes among their heirs or beneficiaries and prevent unnecessary litigation, which can be financially costly.

Despite the benefits of estate planning, the current scenario in India suggests that many individuals do not engage in estate planning, either due to a lack of awareness or because of cultural factors. In India, the concept of estate planning is relatively new, and there is a general perception that discussing death and inheritance is a taboo subject. This often leads to families not discussing their assets and inheritance plans, which can cause problems in the future.

Additionally, many individuals may not engage in estate planning due to a lack of understanding of the legal and financial aspects involved. They may also underestimate the importance of estate planning or assume that it is only relevant for the wealthy. However, regardless of an individual's wealth or social status, estate planning is essential to ensure that their assets are protected, and their heirs or beneficiaries are taken care of.

In recent years, there has been a growing awareness of the importance of estate planning in India, and many financial advisors and legal professionals now offer estate planning services to individuals.

Estate planning through wills

One of the most common and effective ways to carry out estate planning is through a will. A will is a legal document that outlines how a person's assets will be distributed after their death. It allows individuals to have control over who inherits their assets and can also provide instructions for the care of dependents.

To create a will in India, the individual must be of sound mind, over the age of 18, and must sign the document in the presence of at least two witnesses. The will must also be attested by the witnesses, who should not be beneficiaries of the will. It is recommended to seek the assistance of a lawyer or professionals while drafting a will to ensure it is legally valid and covers all necessary aspects.

When drafting a will, it is important to list all assets, including property, investments, bank accounts, and personal belongings, and specify how they should be distributed among beneficiaries. The will should also name an executor, who will be responsible for carrying out the provisions of the will and handling any legal proceedings related to the estate.

It is essential to keep the will up-to-date and review it periodically to ensure that it reflects any changes in the individual's personal circumstances, such as marriage, divorce, or the birth of a child. A properly executed and updated will can provide peace of mind to the individual and their loved ones, ensuring that their assets are distributed according to their wishes.

When someone creates a Will, they are called the testator. The executor, appointed by the testator, is responsible for carrying out the instructions in the Will. To do this, the executor must initiate a probate process by applying to a competent court for permission to distribute the property according to the testator's wishes. Their primary duty is to ensure the Will is executed as written by the testator.

Estate planning through trusts

A trust is another popular option for estate planning. A trust is a legal arrangement where a trustee holds and manages assets on behalf of the trust's beneficiaries.

Here are some steps to consider when using a trust as a part of estate planning:

Choose a trustee: The trustee is the person or entity responsible for managing the trust and its assets. It is essential to choose a trustee who is trustworthy and competent in managing the trust assets.

Select the type of trust: There are two primary types of trusts: revocable and irrevocable. A revocable trust can be changed or revoked at any time, while an irrevocable trust cannot be changed without the consent of the beneficiaries. Depending on the individual's goals and circumstances, they can choose the type of trust that suits them best.

Fund the trust: Once the trust is established, assets such as cash, securities, and real estate can be transferred to the trust. The trust document will specify how the assets should be managed and distributed.

Name beneficiaries: The trust document will also specify the beneficiaries who will receive the assets held in the trust. It is crucial to ensure that the beneficiaries are named correctly and that their interests are protected.

Manage the trust: The trustee is responsible for managing the trust assets and distributing them to the beneficiaries according to the trust document's instructions.

Using a trust as an estate planning tool offers several advantages. One significant advantage is that it allows individuals to pass on their assets to their heirs and beneficiaries without going through the probate process, which can be lengthy and costly. Probate is the legal process of transferring the assets of a deceased person to their legal heirs. Additionally, trusts can offer tax benefits and asset protection for the beneficiaries.

Estate planning through Limited Liability Company (LLC)

A Limited Liability Company (LLC) can also be used to transfer assets to their heirs. An LLC is a business structure that combines the liability protection of a corporation with the tax benefits of a partnership.

To use an LLC for estate planning, an individual would form the LLC and transfer assets such as real estate, stocks, and other investments into the LLC. They would then name their heirs as members of the LLC, which would give them ownership of the assets held by the LLC upon the individual's death.

One advantage of using an LLC for estate planning is that it can provide greater flexibility and control over the transfer of assets. The individual can retain control over the assets during their lifetime, and can also name a manager to manage the LLC after their death.

Another advantage of using an LLC is that it can provide greater protection for the assets from creditors and lawsuits. Because the assets are held by the LLC, they are protected by the LLC's liability shield.

However, there are some potential drawbacks to using an LLC for estate planning. For example, transferring assets into an LLC can trigger gift taxes, and there may be ongoing tax and legal requirements for managing the LLC.

Overall, using an LLC for estate planning can be a viable option for individuals who want greater control over the transfer of their assets and greater protection for those assets. However, it is important to consult with a qualified attorney and tax advisor to determine if an LLC is the best option for one's individual situation.


In conclusion, estate planning is an important aspect of financial planning that individuals should not neglect. By engaging in estate planning, individuals can ensure that their assets are distributed as per their wishes and minimize the tax liabilities and legal hassles for their heirs and beneficiaries.

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